In Q4 of 2022, there was a looming fear that a recession was imminent with many believing that it was going to happen very quickly as soon as we entered 2023. Fast forward to June now, and with almost half the year behind us already, the idea of a recession is still hanging above our heads with no indication when it will happen.
Many financial experts still believe that the resilience of the economy in early 2023 does not mean we’re in the clear just yet. They have come out to say that the effects of the aggressive rate hikes that we saw in 2022 are only now just starting to make its way through the economy and we will begin to see what they will look like in the second half of the year. This school of thought aligns with the BoC actions as they have paused interest rate hikes in the past couple of sessions as they’re also waiting to see what the effects of last year’s rate hikes have on the economy.
With some businesses having paused any sort of growth plans due to uncertainties leading into 2023, what should they do for the second half of the year? Should they continue to stay on the sidelines on their hiring plans or is it time to put those plans into action? Let’s explore some of the economic data and what they mean.
Job market has been booming
Contrary to what many people thought would happen to kickstart the year in 2023, there has been continued growth in the labour market month after month with tens of thousands new jobs being added each month and the latest data from April shows that ad additional 41,000 jobs were added while unemployment rate hovered slightly above record lows at 5%. These numbers have continued to surprise economists who were expecting much lower growth to start off the year. However, there is some explanation to the growth as a result of the high immigration levels we’ve experienced in the past few months.
Businesses who have been hiring in 2023 have already had their plans for hiring held on pause for too long. Despite the continued warning signs, it has not slowed down most businesses to want to move forward with growing after a few years of standstill. For those who are still waiting on the sidelines, the signs may still be cloudy until we’re officially in a recession and while you continue to wait, more talent will be scooped up by the competition.
Tensions behind return to the office
With large corporations and government agencies leading the way in mandating their employees to return to the office, more and more medium-sized and small businesses are now following suit. The last few months we’ve heard louder voices from both sides on the future of remote work with employees seeing no reason to go backwards after having successfully navigated through the challenges of the past few years. Business leaders on the other hand believe that unless there are external factors that force the team to work remotely, it is still the best option to have the team together in an office setting for better collaboration and performance.
This has been a challenge for some businesses in attracting the right talent for their team as many job seekers are still looking for opportunities that allow them the flexibility to work remote. If the position can be done remotely, you may want to still offer some form of hybrid flexibility in order to secure the talent you want.
So far, we’ve seen stronger than expected growth in GDP and employment to start off the year. However, interest rates are still much higher than they have been in the past 10 years, and the highest they have been in the past 20 years. As discussed, there is a lag in the effects to the economy that high interest rate with the intent to slow down inflation. The BoC is expecting that inflation rates to come down to 3% during the summer, but if that doesn’t happen, rate increases may return. However, many economists believe that the BoC will continue to take a position on the sideline to see more data on what effects the rate hikes to-date are having on the economy.
Should everything go according to plan, no further interest rate hikes may be needed and the focus will shift towards continuing to get inflation back down to the targeted 2% and when rates begin to reverse course back down. This is good news for businesses as borrowing costs will be lower for expansion plans and hiring talent. It’s still too early to say how long it will take for interest rates to go back down to the low levels we’ve enjoyed the past few years or if it will get back down to those levels.
No one can be 100% whether things will still be dark and gloomy the rest of the year or will we begin to see clear blue skies. However, what can be certain is that if businesses continue to stay on the sidelines while others push forward with their plans, the only talent that remains may not be the ones that you want.
Contact Us today to speak with one of our Recruitment Specialists and let us help you build your team with the right talent this year!
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